Vector autoregressive approach after first differencing: A time series analysis of inflation and its determinants in Tanzania
The objective of the study was to examine the trend of inflation and its key determinants in Tanzania. We used secondary time series data observed annually from January 1970 to 2020 which are inflation rate, GDP, Exchange rate and money supply. The vector autoregressive (VAR) model was employed for...
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| Lenguaje: | en_US |
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Oradea Journal of Business and Economics
2024
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| Acceso en línea: | http://doi.org/10.47535/1991ojbe128 https://scholar.mzumbe.ac.tz/handle/123456789/365 |
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| author | Cheti, Rachel R. Ilembo, Bahati |
| author_facet | Cheti, Rachel R. Ilembo, Bahati |
| author_sort | Cheti, Rachel R. |
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| description | The objective of the study was to examine the trend of inflation and its key determinants in Tanzania. We used secondary time series data observed annually from January 1970 to 2020 which are inflation rate, GDP, Exchange rate and money supply. The vector autoregressive (VAR) model was employed for modeling. Augmented Dickey-Fuller test (ADF) found that inflation rate, Gross Domestic Product (GDP), exchange rate and Money supply (M3) were initially non-stationary but they became stationary after first differencing so as to proceed with the analysis. Preliminary tests before obtaining vector auto regressive model were carried out before determining the relationship between the variables. Diagnostic test such as serial correlation, heteroscedasticity, stability and normality were also important to evaluate the model assumptions and investigate whether or not there are observations with a large, undue influence on the analysis. We used Granger causality test (GCT) to determine causal- effect relationship between the variables. The results show that, there is a long run relationship between the variables, also the results showed that exchange rate and money supply (M3) both have a positive impact on inflation rate while gross domestic product (GDP) revealed a negative impact on inflation rate. Finally, the forecast of inflation rate for 15 years ahead was performed. The study recommends that the government should pursue both contractionary monetary policy and fiscal policy in order to control inflation in the country |
| format | Article |
| id | oai:null:123456789-365 |
| institution | Mzumbe University |
| language | en_US |
| publishDate | 2024 |
| publisher | Oradea Journal of Business and Economics |
| record_format | dspace |
| spelling | oai:null:123456789-3652024-03-28T08:03:30Z Vector autoregressive approach after first differencing: A time series analysis of inflation and its determinants in Tanzania Cheti, Rachel R. Ilembo, Bahati Autoregressive money supply inflation The objective of the study was to examine the trend of inflation and its key determinants in Tanzania. We used secondary time series data observed annually from January 1970 to 2020 which are inflation rate, GDP, Exchange rate and money supply. The vector autoregressive (VAR) model was employed for modeling. Augmented Dickey-Fuller test (ADF) found that inflation rate, Gross Domestic Product (GDP), exchange rate and Money supply (M3) were initially non-stationary but they became stationary after first differencing so as to proceed with the analysis. Preliminary tests before obtaining vector auto regressive model were carried out before determining the relationship between the variables. Diagnostic test such as serial correlation, heteroscedasticity, stability and normality were also important to evaluate the model assumptions and investigate whether or not there are observations with a large, undue influence on the analysis. We used Granger causality test (GCT) to determine causal- effect relationship between the variables. The results show that, there is a long run relationship between the variables, also the results showed that exchange rate and money supply (M3) both have a positive impact on inflation rate while gross domestic product (GDP) revealed a negative impact on inflation rate. Finally, the forecast of inflation rate for 15 years ahead was performed. The study recommends that the government should pursue both contractionary monetary policy and fiscal policy in order to control inflation in the country Nil 2024-02-27T05:41:32Z 2024-02-27T05:41:32Z 2021 Article APA http://doi.org/10.47535/1991ojbe128 https://scholar.mzumbe.ac.tz/handle/123456789/365 en_US application/pdf Oradea Journal of Business and Economics |
| spellingShingle | Autoregressive money supply inflation Cheti, Rachel R. Ilembo, Bahati Vector autoregressive approach after first differencing: A time series analysis of inflation and its determinants in Tanzania |
| title | Vector autoregressive approach after first differencing: A time series analysis of inflation and its determinants in Tanzania |
| title_full | Vector autoregressive approach after first differencing: A time series analysis of inflation and its determinants in Tanzania |
| title_fullStr | Vector autoregressive approach after first differencing: A time series analysis of inflation and its determinants in Tanzania |
| title_full_unstemmed | Vector autoregressive approach after first differencing: A time series analysis of inflation and its determinants in Tanzania |
| title_short | Vector autoregressive approach after first differencing: A time series analysis of inflation and its determinants in Tanzania |
| title_sort | vector autoregressive approach after first differencing a time series analysis of inflation and its determinants in tanzania |
| topic | Autoregressive money supply inflation |
| url | http://doi.org/10.47535/1991ojbe128 https://scholar.mzumbe.ac.tz/handle/123456789/365 |
| work_keys_str_mv | AT chetirachelr vectorautoregressiveapproachafterfirstdifferencingatimeseriesanalysisofinflationanditsdeterminantsintanzania AT ilembobahati vectorautoregressiveapproachafterfirstdifferencingatimeseriesanalysisofinflationanditsdeterminantsintanzania |